YMM1 Task 1 Healthcare Financial Resource Management

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1 YMM1 Task 1 Healthcare Financial Resource Management Rebecca Rudd College of Health Professions, Western Governors University Ashlee Garrett February 3, 2023

2 Healthcare Financial Resource Management A: Revenue Cycle Revenue cycle management and strategies are imperative to the overall financial stability of healthcare organizations. The revenue cycle begins when a patient contacts the healthcare entity to arrange services for care. The adoption of electronic health records systems has improved transparency in the various stages of the process, along with ability to have increased reporting insight. According to Oachs and Watters (2020), revenue cycle is placed into three phases. The beginning of the process begins with front-end operations including, patient scheduling, insurance eligibility verification, obtaining authorization for treatment, point-of-care collection and as needed financial counseling. Federally Qualified Health Centers (FQHCs) are required under their Health Resources and Services Administration (HRSA) funding to determine financial eligibility for sliding scale programs to assist in reducing the cost of healthcare based upon federal poverty levels. As healthcare laws are evolving, organizations are also adopting Good Faith Estimates (GFEs) to ensure patients are informed of the cost of services, care and other charges prior to services being rendered. This initial process for revenue cycle is the first touch point where if information is incorrectly gathered, the remainder of the revenue cycle chain will be negatively impacted. The second process involves ensuring organization has a master charge file with designated Current Procedural Terminology (CPT) codes and associated fees. As care is rendered there is clinical documentation supporting services provided, along with accurate charge codes applied to the patient’s account via charge capture. This phase is often where there

3 are missed revenue opportunities when staff do not fully document or code for services rendered. With the adoption of electronic health records, it is important that policies and procedures are in place to monitor for timely documentation entry, along with transparent codified clinical documentation. Failure to ensure timely documentation can lead to denied claims for timely filing deadlines. Based upon the type of healthcare organization, case management or utilization management can also be included in the middle process. These two services can ebb and flow through the three phases based upon the need in relation to revenue cycle management (Watters, 2020). Case management and utilization management play important roles for payment reform and the quadruple aim of healthcare. The third phase is considered the back-end process that includes claims processing, payment posting, collections of outstanding balances and claim denial management activities. This phase integrates the first and second phase activities with a goal to submit a clean claim for payment to payers. Many sophisticated certified electronic health record systems can assist in the revenue cycle process and submit electronic claims, along with preparing patient financial statements. Electronic claims remittance can also include the electronic management of the claim within the patient’s financial account, along with indicating claim payments with modifiers to indicate any denials for ease of reporting. There are necessary checks and balances that organizations should have in place to monitor the claim process. Often a resource is assigned to review claims for potential areas of concern prior to submitting for payment. Areas of concern can include incorrect payers attached, wrong rendering provider or location indicated for service, mismatch of CPT to diagnosis code, along with other errors that could result in claim denial. Claim denials need to be reviewed by the organization in a timely manner, and actions to provide information or coding updates processed within designated timeframes to increase the likelihood

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4 of payer reconsideration of the claim. When payments are received, they need posted to the correct date of service and billable line item, along with determination of any patient self-pay or deductible balances. Based upon contracts with payers, the organization may need to apply contractual write-offs for designated current procedure terminology (CPT) codes on the claim. The organization should implement policies regarding patient financial responsibility determination and collection processes. A policy should provide details on the number of billing statements that are provided to the patient prior to turning the account over to a collection agency or writing off balances to bad debt. The revenue cycle is complete once the claim is indicated as closed which may indicate paid in full, bad debt write off, contractual write-offs, sliding fee adjustments or any other activities to close each CPT on the claim. A claim typically is care that is rendered on a specific date of service, unless the care rendered is considered a bundled level of care such as surgical care that can include a post operative visit. This process can take weeks to months. Organizations must ensure efficient processes are in place to monitor and as needed take actions on outstanding claims. A1: HIM Work HIM staff are key resources to assist in managing patient data and electronic revenue cycle systems. These resources may function as revenue cycle auditors, along with auditing clinical documentation for accuracy (O’Connor, 2022). HIM staff primary role in revenue cycle management surrounds the activity of auditing clinical documentation and assigning codes, such as ICD-10, CPT and HCPCS (Oachs & Watters, 2020). This skillset requires the resource to have clinical terminology expertise, along with understanding of coding regulations and guidelines that could differ by payer. HIM professionals often work in liaison with other departments such

5 as Quality and Risk Management for auditing purposes. The charge master file upkeep is often a multidisciplinary team including HIM resources, along with ancillary services and departments to ensure active codes follow coding standards, have appropriate fee schedule assigned, implement organizational policies, and provide education to applicable staff on coding principles. HIM staff may have responsibilities in the first phase of revenue cycle management. If the organization is using an electronic health record system, the configuration of the system needs to be optimal to decrease data entry errors for patient level insurance information. HIM staff can assist in the system configuration for payer information, service item rules per payer, management of the service item master file for codes, along with other system configuration in relation to charge capture and claims processing. HIM resources are crucial for phase two of revenue cycle. They are instrumental in reviewing clinical documentation and auditing for coding based upon supporting documentation. They may be required to consult with the rendering provider to edit coding submitted through electronic health record system or in some instances provide guidance and education of missed coding opportunities that would affect revenue capture. Resources often utilize report queries to evaluate level of care indicated with CPT codes in relation to assigned diagnosis codes (ICD-10) to ensure appropriate coding relation between the two code sets. Vast knowledge of coding principles is required to provide optimal supporting activities. Phase three of revenue cycle management engages HIM resources to assist with claims processing, denial management, and auditing activities. They can assist with configuration and audits for system processing of claims, which often requires updates to individual payer configurations. Documentation audits may be necessary for claim denials and appeals, along

6 with coding edits with supporting documentation in the clinical record. Case and Utilization managers may also request reporting assistance from HIM resources to monitor current census for acute care facilities to provide a working list of patients. HIM staff can provide insight and reporting assistance to improve the revenue cycle management activities of an organization by collaboration with other departmental resources with the goal of financial stability. A2: Coding and Billing Cycle Processes An organization’s financial stability relies upon efficient revenue cycle management policies and processes. TechTarget (2022) indicates the backbone of revenue cycle management includes coding and medical billing to ensure providers are reimbursed for services rendered. The first touch point is when the patient contacts the provider to arrange or schedule care. It is during this time that schedulers or pre-registration staff can gather correct billing and payer information to be added to the patient’s account. It is also this initial point where incorrect financial information will lead to incorrect claims. Revenue cycle begins with registration and is completed when the provider of services received all payments due for care rendered. Coding for services rendered is imperative to financial stability. Incorrect and missed coding opportunities negatively impact organizational revenue cycles. Entities should implement policies to support efficient timely coding or services rendered. Many payers have filing deadlines that must be met to obtain payment. Providers failing to timely submit codes for claims can lead to loss of revenue. HIM resources can assist in monitoring compliance with organizational documentation policies and auditing to assist in assigning clinical codes, as needed. Once charge codes are submitted and reviewed the claim process begins. Billing systems utilize data to determine if a paper or electronic claim is filed. Some organizations will employ

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7 third-party claims clearinghouse providers to assist in managing claims. Clean claims will aid in faster claims processing by payers. Regarding self-pay patients, organizations should make attempts to collect payment at time of service. Collection at time of service will reduce costs of paper billing statements, postage, and staff time to manage accounts. Once efforts to collection patient due balances have been unsuccessful, organizations often will turn accounts over to a collection agency to pursue further attempts and as applicable, report failure to pay to various credit score agencies. This can lead to patients having low credit scores and negatively impact their financial status for loans and other key financial activities. Organizations typically will write these balances off to bad debt, thus negatively impacting the revenue stream. Organizational financial goals should include metrics to monitor financial stability. By monitoring compliance to policies for timely documentation and coding, along with days between date of service and claim submittal, an organization can uncover areas of concern to implement an analysis and action plan to address areas of concern. Insight into understanding where processes are inefficient will assist in opportunities to improve operations, educate staff, configure electronic systems, and improve revenue cycle activities. A3: Operating Revenue Operating revenue is generated from core services. In the case of healthcare organizations, this is patient care or patient services rendered. Planning for an annual operating budget will include projected operating revenue for the fiscal year. It is expected that there will be variances throughout the fiscal year. Operating revenue is relayed upon to cover payroll, payroll fringe expenses, and operating expenses. Financial stability requires that the operating revenue be at least even or preferably exceeds operational expenses.

8 Higher patient revenue leads to improved financial profitability for an organization. The other key is efficiently and effectively managing revenue cycle. Delayed payments lead to decreased revenue for the organization at any point in time. Payer mix for the patients served must also be taken into consideration. An efficient revenue cycle process leads to a healthy incoming revenue flow for healthcare organizations (Robinson, 2007). Payment reform programs will influence healthcare organization’s operating revenue. Depending upon the level of risk assumed by the organization by participating in an Accountable Care Organization (ACO), operating revenue will be impacted. In some instances, providers are provided incentives at a per patient rate based upon clinical quality metrics. However, in other models’ providers could receive a decreased payment schedule when the care they provide does not meet the baseline or exceed expectations for clinical quality of care. Another consideration is the cost of care per patient in the provider’s panel. Care management to drive lower cost of care and compliance with plan of care is necessary to avoid overutilization of emergency rooms or urgent care facilities that are higher cost of care than a primary care physician team. Healthcare organizations will have to strategically plan to maintain operational revenue levels to support financial stability of the organization, not only by increased patient volume but also by improved self-pay balance collections and favorable contracts with third party payers. B1: Profitability and Risk Financial statements provide various data points to indicate an organization’s financial health. Standard reports often utilized are balance sheets, statement of operations, changes in net assets, and cash flow statements. Balance sheets provide a snapshot at a specific time to indicate assets, liabilities, and equity. A statement of operations report shows an organization’s financial status through variances that impact operations. This report will provide details on incoming

9 revenues in comparison with expenses for the designated reporting period. Organizations with multiple service lines may elect to report revenue and expenses separately for each department to provide a more detailed view of profitability status of a service line. Changes in net assets report may vary based upon if the entity if non-profit or for-profit. This type of report details the differences between current and prior reporting periods for net asset balances. Cash flow statements provide insight to how monies are being generated such as operating, investing and financing activities. Certified electronic health records and practice management systems with revenue cycle components offer further insight into the financial health of an organization. Discrete data collection for primary medical coverage can provide information related to the payer mix of the practice ’s patient population. Organizations can review Medicare and Medicaid percentages of active patient population to forecast revenue, or any other payer mix combination desired. Days in Accounts Receivable reports are valuable to measure as a financial quality metric for performance improvement. By utilizing a variety of financial statements and reports, healthcare organizations can closely monitor overall financial health, as well as service line profitability. This type of data assists in strategic planning for executive and board teams. Financial data is used for tracking reimbursement, controlling costs, budget planning and reimbursement forecasting. Understanding the financial wealth aids in determining the amount of risk an organization is willing to undertake for capital projects and investments. B2: Financial Viability Per Robinson (2007), the two departments with major effect son financial viability are the patient financial services and health information management coding departments. Incorrect

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10 coding and claim denials lead to prolonged reimbursement and in some case no reimbursement that impacts operating revenue. Ensuring a high functioning team that collaborates challenges and barriers offers opportunities to define and implement change management activities to support a healthy revenue cycle management program. There are many other factors that impact financial viability. Provider and staff burden are leading causes to burnout and concerns with retention and recruitment. The adoption of electronic health record systems did not decrease documentation burden but shifted how the existing burden was perceived. Provider productivity is impacted by the increased regulatory requirements for documentation, along with other forces outside the provider’s control such as support staffing. Patient volume fluctuations impact revenue, along with payer mixes of the patients receiving care. Other factors impacting financial stability could include legal suits filed against organization and/or provider, natural disaster events, third payer contracting changes, and other healthcare landscape changes. Certified electronic health record systems offer reporting capabilities to uncover areas of concern impacting financial viability. For example, primary care offices may generate provider productivity reports to review number of patients seen per day, along with charges associated for each visit against an expected patient volume and charge for comparison. Another useful report is the Appointment Statistical Analysis report to provide data related to appointment no shows, cancellations, and kept appointments. By understanding no show and cancellation rates, organizations can take proactive actions in scheduling appointments to account for loss of revenue when patients fail to keep appointments. Successful organizations will implement a check and balances system to monitor overall financial stability. By analyzing various report types, an organization can uncover areas of

11 concern and implement processes with an end goal of improving financial outcomes. It is imperative to understand data must be validated for accuracy to instill confidence and trust for stakeholders. C: Financial Decision-Making Process Improved patient outcomes for quality and safety are linked to strong financial performance for an organization (Akinleye et al., 2019). The healthcare organization ’ s executive suite should include a Chief Finance Officer who is skilled in financial management. They must also possess a communication style that takes into consideration different communication styles within the organization to ensure data and other key knowledge items are shared in a consumable format for the intended audience. The revenue cycle, accounting and claims teams in an organization often align in reporting un der the organization’s finance department and/or health information management department. Clinical services departments typically fall under the operations department but rely upon data collected and shared by the financial reports for decision making. While each organizational structure varies in terms of responsibility, transparency of the overall financial stability of an organization should be shared with employees. Financial data must be considered for budget purposes for each service line within the organization. In addition, the larger landscape needs to review assets and liabilities for an in-depth stability picture. Financial health of an organization must be considered when discussing expansion of services, capital expenditures, investing of funds, contracting with payers, participating in alternate payment programs, along with other considerations that could impact the financial viability of the entity. Like personal financial indicators, understanding the organizations ration of current assets to liabilities will provide a snapshot of financial health at any given time. Another key report that is

12 often viewed is the total margin ratio to indicate the profitability of an organization (Oachs & Watters, 2020). Operations of a healthcare organization are directly affected by the financial stability of the entity. When an entity is more profitable, they can invest back into the core and ancillary operations. In comparison, groups with poor financial health do not have the resources to invest in expansion, state of art technology and staffing. D: Fraud and Abuse Regulations The Office of the Inspector General (OIG) strategic plan includes identification and actions to fight fraud, waste, and abuse (Oachs & Watters, 2020). Similarly, The Center for Medicare Services (CMS) has adopted regulations to monitor fraud, waste and abuse of providers who submit claims for payment. Entities who submit false claims can be subject to fines and other consequences under the False Claims Act (FCA). The Anti-Kickback Statue (AKS) outlines regulations for soliciting, remuneration, and receipt of beneficial rewards that are payable under a federal program a criminal offense. Guilty findings can lead removal as providing entity for federal health programs, fines and in some instances imprisonment. Before this statue was in place, it was not uncommon for pharmaceutical companies to offer providers posh hotel stays, meals, or compensation to entice prescribing of their medications. This statute does provide for safe harbors to protect certain instances such as agreements for accountable care organizations who are working to reduce healthcare costs and fraud. Kickbacks can lead to overutilization, increase cost of healthcare and negative influence on medical decision making. Healthcare organizations need to be aware of their business partners and their own activities to avoid inducing or rewarding for patient

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13 referrals or other activities that could generate revenue when services are payable under a federal health care program. The Stark II law provides laws to prohibit physicians or other medical providers from referring patients for health services payable by Medicaid or Medicare in which the physician or an immediate family member has a financial relationship with the entity. This can include owning stock or other investment interest, in addition to ownership of the organization. Healthcare organizations should poll their employees for any conflict of interest in relation to this law to avoid potential liability. Both the Anti-Kickback Statute and Stark Law have led to healthcare organizations implementing policies and processes to uncover potential risks of noncompliance with regulations. The OIG publicly shares information regarding offenses, which can lead to negative publicity for the offending provider and organization. This type of publicity can lead to decreased opportunities for revenue with public distrust when an infraction is announced. D1: Importance of Stark II Stark I was part of the Omnibus Budget Reconciliation Act of 1989 and focused upon barring self-referrals for clinical lab services under Medicare. Stark II was included in the Omnibus Reconciliation Act of 1993 and increased the range of additional health services while adding Medicaid payers under the law. It is important for healthcare providers to understand this law and the potential impact it could have on the organization. Referral indicates any request for a specific or service that includes designated health services in the law. Financial relationships can include investments, ownerships, and any compensation contracts. Under this law, there can be ramifications even when the provider inadvertently refers patients for services without intent to break the law. Regardless of the rationale, the provider is liable for their actions. There is the

14 possibility of financial penalties, jail time and in some cases being removed from providing services for Medicare and Medicaid payers. This law prevents providers from benefiting financially from conflicts of interest surrounding patient referrals for services. It has a limited scope of enforcement by applying to only to clinical care practitioners. All employees of healthcare organizations need to be familiar with the Stark Law and their ability to report potential violations. There are allowable exceptions outline in the law. Several regulatory offices oversee the Stark Law, including CMS, HHS, and department of justice (Huttinger & Aeddula, 2022). D2: Importance of Anti-Kickback Statute The Anti-Kickback Statute (AKS) is a federal law that bans kickbacks in federal health care programs. The Office of the Inspector General (OIG) is the agency who oversee enforcement. Under this law physicians and hospitals can not offer to pay or solicit for patient referrals for care, this also includes the ban on receiving anything of value or reward from those who refer business to the organization. Both the person receiving the kickback and the entity providing the kickback can be prosecuted under this law. The intent of the action for a violation must be proven to knowing and willful. There are both criminal and civil penalties that can be imposed. Violators can be charged with a felony and fines up to $25,000 per incident and possibility of five-year prison sentence. Violations can also lead to being found liable under the False Claims Act. In this instance, a lawsuit can be filed in a federal court. Penalties if found guilty can be up to three times of the loss suffered, plus $11,000 per claim. The OIG may also impose civil monetary penalties. The number of fines can quickly add up and negatively affect the financial health of the provider and organization.

15 The law does provide for some instances of safe harbor. One area of concern has been the creation of advanced payment models under the Medicare MACRA and MIPS program. Value based payment models incorporate a community of providers who agree upon coordination of care with associated risks based upon patient populations. Providers, physicians, and other types of designated suppliers fall under safe harbors for care coordination, patient engagement and outcomes-based payments. This is just one example of a safe harbor under the federal register. Healthcare organizations must ensure they are familiar with this law, in addition to taking steps monitor to compliance. The OIG announces infractions which can lead to public scrutiny for the organization with lasting impacts on revenue streams. Contracting services need to be examined to verify that there is no possibility of illegal kickbacks crossing between the entities. Business associate contracts should contain language indicating that there will be no payment or solicitation activities for referrals related to patient care services. Violating the AKS can lead to compromising the clinical decision making of providers and hospitals, rather than non-biased decision on treatment care plans. Losing the ability to provide services to Medicare, Medicaid, and other federal payers can have a devasting effect on an organization’s financial viability. E: Healthcare Pricing Three factors that influence pricing are desired net income, competitive position, and market structure (Cleverly & Cleverly, 2018, p. 154). Healthcare organizations must generate enough revenue to cover the cost of operations. The difference between revenues and expenses provides the ability to determine necessary or desired net income. Healthcare organizations need to routinely monitor fee schedules and payer contracts to ensure changes in pricing are timely updated. Competitors also come into consideration when reviewing healthcare pricing. The consumer’s perception of the level of service is considered when determining pricing. If a patient

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16 considers the healthcare organization to deliver exceptional patient centered care, they are more likely to seek care there over another organization with low consumer satisfaction scores or those delivering care in outdated facilities or older technologies. Cost of care is evaluated to determine overall healthcare costs per patient. Recently there has been a shift to employ mid-level clinical practitioners, such as nurse practitioners and physician assistants, over medical and osteopathic doctors. Mid-level provider salaries are less than a medical doctor. Therefore, they can render care at a lower cost which leads to increased profit for the organization. Market share and the availability of similar services in the geographic area are considered in healthcare pricing. When there are less competitors in the area, the healthcare organization is better positioned for negotiating payment contracts with payers. CMS provides a pricing system based upon relative value units (RVUs) that are assigned to CPT codes. This method defines the value of the service. Often rendering providers will have metrics related to RVUs for compensation plans and incentives. This program was created to curve healthcare costs by setting customary charges and eliminate unequable payments amongst providers. Healthcare organizations providing services under Medicare will need to be aware of the Medicare Provider Fee Schedule and the impact based upon patient population mix for financial impacts when assigning cost to services. When setting up a master fee schedule or charge description master the fee associated with each service should be the same regardless of payer. Pricing needs to be competitive and reasonable at the same time. The organization will need to take into consideration patient population mix and payer mix and the impact of write-offs for indigent care, managed care contracts, and other instances where entire cost is not seen as revenue per service. Electronic health record systems and revenue cycle systems offer the ability to build in payer rules for each

17 CPT or line of service to automate customary write-offs and identify patient financial responsibility. Pricing formulas can be utilized to assist healthcare organizations. For example, they can consider average cost of care, required net income, patient and payer mixes and average discount on service to determine a recommended cost. Comparing the organization’s charges to a comparable organization can provide audit opportunities to review and update existing pricing schedules. F: Financial and Strategic Planning Healthcare organizations consider their mission and value statements for strategic and financial planning. Strategic planning provides a vision of where you want the organization to be in the future, along with basic steps that are necessary to meet the objectives of the plan. However, to achieve success for strategic plans an organization must be financially stable and outline how financial resources will assist in meeting goals of the organization. There are three areas for consideration in the integration of strategic and financial planning (Cleverly & Cleverly, 2018, p. 308). The organization ’ s board of trustees engages in strategic and financial planning. The board collaborates with the executive team to evaluate the financial feasibility of the strategic plan. Strategic planning is often a visionary process and to promote creativity precedes financial discussions. In some instances, such as receipt of grant funding financial planning is part of the strategic plan for the funding initiative. An active board will provide guidance to the organization during financial planning and review profitability projections, financial feasibility, risk assessment for ventures, along with review of current financial status of the organization.

18 The National Association of Community Health Centers (NACHC) provides community health centers with resources and training opportunities for new and existing board members to assist in understanding board responsibilities. They work to together with the health centers to add a skillset of financial oversight and strategic planning concepts to board composition. Other healthcare organizations outside of those federally funded, should take similar steps to ensure a well diverse board with the necessary skills to assist the entity in growth and profitability. A valuable tool is a SWOT (strengths, weaknesses, opportunities, and threats) Analysis to reveal internal and external factors that can impact strategic goals. In summary, strategic planning provides a roadmap for the direction the organization wants to achieve. Financial planning involves the details for the use of funds to support the strategic plan, or in some instances provide guidance for redirection when goals are not financially feasible. F1: Financial Plan Development According to Cleverly and Cleverly (2018), there are four steps to creation of a financial plan. The first action is to be aware of the current organizational financial health and trending of prior growth patterns. This is accomplished by reviewing past financial statements and historical financial ratios for the organization. The second step is defining total asset growth that is necessary for the fiscal year or planning period. This requires the ability to forecast future revenues and expenses. Evaluation of asset growth assists in understanding how effective the organization is at using assets to generate revenue. Thirdly evaluation of acceptable levels of debt for current and long-term goals is necessary for consideration of financial plan. Debt should not be in the equation to balance financial plans. The executive and board teams must define the amount of debt that the organization is willing to assume. Current liabilities are calculated into

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19 the decision for current debt ceilings, while long-term debt decisions can drive investments and borrowing of funds. Evaluation of required growth rate for equity is the final step in financial planning. The prior steps have included review of financial reports, income statements, profitability reports and other key metrics to assist in determining if the financial plan is realistic. An organization determines if the goals are achievable and if the projected financial numbers meet the need. F1A: HIM Interaction A HIM manager interacts with organizational finance department to develop financial plans. They are aware of ongoing costs associated with maintaining Current Procedural Terminology (CPT), HCPCS, and ICD-10 codes for billing as an updated set of codes are released either biannually or annual dependent upon the source. Electronic health records systems have the capability to accept a digital import of the code set, however it still takes manual review and configuration to ensure the system meets new coding regulations. Fee schedules or charge master files must be updated to reflect new and retired codes with the opportunity to adjust fees per code for billing. HIM staff work with the finance team to ensure codes that are utilized by the organization have been accurately updated for selection and when assigned have the designated fee for the claim. There may also be training costs for staff to familiarize with updates to ensure efficiency in the revenue cycle process. The HIM manager will also assist in providing information related to costs for purchase or replacement of various health information technologies. There could be annual subscriptions or recurring fees that will need included in organization’s budget. Capital expenditures may require financial planning and board approval. These types of costs will fall under either supplies or capital expenditures depending upon capital threshold. HIM managers often must defend these

20 entries on the financial plan, as the need to upgrade technology is not fully understood by other departments. Technology is often a high expense in a financial plan and stakeholders may not understand the ramifications on overall operations and financial impact when outdated equipment continues to be in routine use within the organization. It is the responsibility of the HIM manager to provide guidance and expertise in the financial planning processes. They should be prepared to provide justification for the expenses projected for the financial plan. Highlighting the financial impact on inefficient workflows for coding and billing processes will be a key driver to successful financial planning. G: Financial Management Control Process Financial management control involves assessing the financial state of the healthcare organization compared to financial plan and budget. Goals and objectives of the financial pan which are supported by the budget should tie to the organization ’ s mission and vision. A financial control process is made up of four phases (Cleverly & Cleverly, 2018, p. 380). The first phase of management control is programming. The organization will analyze and decide what programs are needed to achieve goals. This can include analysis of existing and new areas for the organization. Based upon the scope of programs, they may be considered capital expenditures and need to borrow funds from a lender. During this phase, the team will brainstorm and evaluate comparable options to achieve programming goals. For example, a community health center has established a community need for afterhours urgent care provider. The team will consider contracting with another local urgent care provider, adding additional service offering at one of their current locations by extending hours, or the possibility of building a new facility to meet the community need for afterhours care. The team makes a final decision to remodel an area at an existing office location to provide afterhours urgent care. This will

21 require funds for the remodel, equipment, supplies and staffing which must be indicated in the budget for financial planning. The decision is considered a programming decision for the organization. The second phase of the management control process is budgeting. Budgets are prepared to support programming decisions of the organization. In some instances, the team will review prior year ’ s budgets for profitability of existing programs to determine the new budget taking into consideration inflation. Often programming decisions for one department will have effects on other departments within the organization. In the example above, the new afterhours care offering may lead to increase revenue for laboratory and radiology departments. At the same time, the need to have staff on duty for afterhours shifts will increase staffing expenses. It is during this phase; an organization may need to reevaluate programming decisions that are projecting a negative impact for budgets. The third phase of financial management control is accounting. The organization has set goals for programming and created budgets and moves on to implementation of new programs or continuing existing programs. The accounting department will gather financial output and incoming revenue during the operation of the programs. This process includes review of category line items on the budget to determine financial responsibility per budget category. Analysis and reporting are the fourth stage. An organization would have the ability to identify when a budget requires editing based upon actual operating data. The team will work together to uncover the rationale for any variances identified. For example, many healthcare organizations saw an increase in staffing costs during the COVID-19 pandemic due to overtime pay and agency contracting for staff. In this case, the rationale for the increase cost of staffing

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22 was easily identifiable. The finance team should implement policies surrounding thresholds of when variances are investigated. The accounting phase provides the detail reports for analysis. Financial management control processes are in place to manage the financial health and aid in meeting the organizational goals. Well defined policies and procedures will guide an organization in making strategic programming decisions, realistic budgets for service lines and provide in-depth analysis for financial viability of each program.

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23 References Akinleye, D., McNutt, L., Lazariu, V., & McLaughlin, C. (2019). Correlation between hospital finances and quality and safety of patient care. PloS one , 14 (8), e0219124. https://doi.org/10.1371/journal.pone.0219124 Cleverley, W., & Cleverley, J. (2018). Essentials of Health Care Finance . (Eighth edition). Jones & Bartlett Learning Huttinger R., Aeddula N. (2022). Stark Law . StatPearls. https://www.ncbi.nlm.nih.gov/books/NBK559074/ Oachs, P., & Watters, A. (2020). Health Information Management, Concepts, Principles, and Practice (6th ed.). American Health Information Management Association (AHIMA). https://wgu.vitalsource.com/books/9781584267577 O’Connor, S. (2022, February 7). The Impact of Health Information Management Services on The Revenue Cycle. Advanced Data Systems . https://www.adsc.com/blog/impact-health- information-management-revenue- cycle#:~:text=HIM%20professionals%20may%20serve%20as,cycle%20management%2 0data%20collecting%20itself . Robinson, C. (2007). Coding and Patient Financial Services — Creating a Healthy Revenue Cycle . AHIMA. https://library.ahima.org/doc?oid=82364#.Y9aXYHbMJD8 TechTarget. (2022, February 22). Exploring the Fundamentals of Medical Billing and Coding. https://revcycleintelligence.com/features/exploring-the-fundamentals-of-medical-billing- and- coding#:~:text=Medical%20coding%20involves%20extracting%20billable,of%20the%2 0healthcare%20revenue%20cycle . .

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YMM1 Task 1 Healthcare Financial Resource Management

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